Vedant Fashions Limited — Q3 FY25 earnings call

Call held 31 Jan 2025

Management summary

Vedant Fashions delivered a resilient Q3 performance characterized by stable margins despite a challenging macro environment for middle-class consumption. While overall SSSG was modest at 2.6%, the company saw a strong recovery in Tier 2 and 3 cities and double-digit L2L growth in regions outside of Andhra Pradesh and Telangana. Management is adopting a cautious approach to retail expansion due to high rental inflation, prioritizing store quality and sustainable unit economics over aggressive rollout.

Highlights

  • Revenue from operations reached ₹511 crores, representing a 7.8% YoY growth.

  • Maintained industry-leading margins with Gross Margin at 67.3% and EBITDA Margin at 47.4%.

  • Profit After Tax (PAT) stood at ₹158 crores with a healthy PAT margin of 30.9%.

  • Same-Store Sales Growth (SSSG) was 2.6% overall, but notably higher at ~5% when excluding AP and Telangana.

  • Retail footprint expanded to 1.75 million square feet across 666 stores globally.

  • Online segment saw explosive growth of 70% YoY, though it remains a small part of the mix at 3-4%.

  • Mohey brand productivity has reached parity with Manyavar, contributing 25-30% of business in shared stores.

Concerns

  • Regional Concentration Weakness

Key financials

  1. Revenue from Operations ₹511 Cr +7.8%YoY
  2. EBITDA Margin 47.4%
  3. Profit After Tax ₹158 Cr
  4. Same-Store Sales Growth 2.6%
  5. Gross Margin 67.3%
  6. Average Selling Price Growth 1.5%

What they filed

Q4 FY26: revenue up 8.7%, net profit up 12.9% against the same quarter last year.

₹ Cr · quarterly
Line itemQ1 FY25Q2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26
Revenue240 268 511 367 281 +17%263 −2%492 −4%399 +9%
EBITDA113 122 242 166 121 +7%111 −9%218 −10%179 +8%
Net profit62 67 158 101 70 +13%56 −16%135 −15%114 +13%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Mohey (Women's Wear)
    27.5% Business Contribution27.5% Retail Area Allocation
  • Online / Marketplace
    3.5% Revenue Share70% Quarterly Growth

Guidance & targets

Capacity

  • Gross Retail Area Addition Capacity · FY25 · High confidence 1,70,000 - 1,80,000 sq ft
    at the gross level, we will be doing a decent amount of opening, close to about 1,70,000, 1,80,000 square feet, which is what we've been focusing on for the entire financial year.

    — Vedant Modi, CRO

  • Twamev EBO Openings Capacity · Q4 FY25 · High confidence 2
    So currently, we have about 7 EBOs with 2 EBOs opening this quarter.

    — Vedant Modi, CRO

Margin

  • Marketing Spend Increase Margin · FY25 · Medium confidence 40-70 bps
    Let's say, that could be a 40 to 60 basis point difference, maybe 70-point basis difference at a year level marketing percentage difference, but not significantly different.

    — Vedant Modi, CRO

Risks & concerns

  • Regional Concentration Weakness

    high

    Andhra Pradesh and Telangana, historically strong markets, are significantly underperforming the rest of India, dragging down overall SSSG.

    Both acknowledged

  • Rental Inflation

    medium

    High rental expectations in core markets are hindering the pace of new store signings and footprint expansion.

    Management acknowledged

  • Middle-Class Consumption Slowdown

    medium

    Management noted that middle-class consumption for apparel has not returned to previous levels, impacting discretionary spend.

    Management acknowledged

Areas of evasion (2)

  • Direct comparison with Sai Silks' growth in the same 'weak' region.
  • Specific guidance for store openings in FY26.

Q&A highlights

2 direct
Regional Weakness vs Competitor Performance Partial
But a majority of what we understand from this is brands which are closer to us in their offering, which are more men's celebration wear brands, that is where the pain has sort of lied in that market.

The analyst challenged management's claim of macro weakness in AP/Telangana by citing a competitor (Sai Silks) that reported 7% SSSG in the same region. Management's response suggests the weakness might be specific to their sub-segment (men's ethnic) rather than a general regional macro issue.

Asked by Akhil Parekh

Marketing ROI and Strategy Shift Direct
I think judging how the spends bring results in 1 quarter is very difficult for most brands... good marketing gives you delta for the many years to come rather than just the quarter itself.

Management defended a significant increase in marketing spend (₹50cr extra in other expenses) despite soft SSSG, signaling a shift from celebrity-led ads to brand-centric digital campaigns and quick commerce partnerships.

Asked by Rishi Mody

Rental Inflation and Expansion Slowdown Direct
we feel that any lease that we sign is a 9- to 12-year bet, and we want to ensure that all the stores that we open are correct stores and at the correct price. So instead of being aggressive at this moment, we definitely feel that these prices will stable with time.

Explains why the company is tracking behind its initial expansion plans; they are unwilling to lock into high-rent long-term leases during a period of 'rental inflation'.

Asked by Tejas Shah

2 min read 5 chapters

Detailed narrative

Regional Performance Divergence

A key theme of the call was the stark contrast between performance in Andhra Pradesh (AP) and Telangana versus the rest of India. While overall SSSG was 2.6%, excluding these two states, SSSG was approximately 5% for the quarter and 10% for the combined Q2 and Q3 period. Management noted that AP and Telangana, which are high-penetration areas for the company, have been 'laggards' due to macro factors that they are still investigating, as other retailers in those states reportedly show similar trends.

Strategic Pivot in Marketing

Vedant Fashions is evolving its marketing strategy, moving away from high-cost celebrity endorsements toward brand-centric messaging and digital platforms. Marketing spend as a percentage of revenue is expected to rise by 40-70 bps for the full year. The company highlighted successful viral campaigns on quick commerce platforms like Zepto and Blinkit, which helped drive a 70% growth in the online segment during Q3.

Mohey and Twamev Scaling

The women's brand, Mohey, has seen significant traction, with productivity levels now matching the flagship Manyavar brand. Mohey typically occupies 25-30% of the retail area in Manyavar-Mohey combo stores and generates a commensurate 25-30% of the business. Meanwhile, the premium brand Twamev is being expanded with 2 new EBOs in Q4 and a 'super flagship' planned for Q2 FY26, targeting the premiumization trend in metro cities.

Disciplined Retail Expansion

Management emphasized a disciplined approach to store openings, targeting 170,000 to 180,000 square feet of gross area addition for FY25. They are intentionally slowing down in certain core markets where rental inflation is deemed unsustainable, viewing store leases as long-term 9-12 year commitments. Despite the slowdown, the company maintains a strong pipeline and continues to see Tier 2 and Tier 3 cities outperform metros by about 5% in terms of growth delta.

Inventory and Supply Chain Exclusivity

In response to analyst questions about sourcing, management clarified that while they have increased 'purchase of stock in trade' to roughly 24-25% of total stock to improve variety and localization, they maintain strict exclusivity deals with vendors. Any product purchased by Vedant Fashions is guaranteed to be exclusive to them, preventing commoditization and protecting the brand's design-led pricing power.

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